Parking your hard-earned money: Post offices edge banks

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We all make investments to secure our future. In this low interest rate regime, all government-guaranteed savings instruments bear low interest rates. Whenever the question of putting money in a safe instrument arises, many get confused between banks or post office schemes. Financial planners believe that in this era of low interest rates, one has to select instruments intelligently. Money9 offers some tips on where you can park you hard-earned money.

Fixed Deposit

Fixed deposit is considered the safest and secure investment options by many. Suppose you want to invest for medium term, i.e. five years. The largest lender SBI and other banks generally offers rates between 5% and 5.5% interest rate. The highest one can get from some private lenders is 5.7%.

But if you park your money in post office FD for five years, it will give you 6.7%, a full percentage point higher than the highest any bank would offer.

If you deposit Rs 5 lakh for five years in SBI, you will get Rs 6.54 lakh on maturity. But post office will give you Rs 6.97 lakh after the tenure.

Senior citizen schemes

If you are a senior citizen, then you have more reasons to cheer. You should not put your money in the five-year FD of the post office since you would get Senior Citizen Savings Scheme at the same post office. It currently gives you 7.4% annual return.

It means if you have invested Rs 5 lakh for five years, it will give you almost Rs 7.20 lakh at the maturity.

Invest in NSC and KVP

National Savings Certificate (NSC) is one of the best savings options, it pays 6.8% for a minimum lock in five years. This is government-guaranteed and most secure investment instrument.

This will give you almost Rs 2 lakh extra if you invest Rs 5 lakh for five years. Kisan Vikas Patra doubles your money in 124 months. It offers 6.9% interest rate.

One can start investment with only Rs 1,000 and can add in multiples of Rs 100 with no upper limit. The returns are fixed and secure too.

Important points 

In banks you don’t have so many options as you get in the post office. There are FD, RD, SCSS and some other instruments in a post office. If you are planning to invest a lump sum or make small yet regular investments, post office schemes are the best, according to financial experts.

“Interest rates are on a downward trajectory, and it is just a matter of time before they dip further. Investors should look for simple products and post office schemes are the best among all,” said Nilotpal Banerjee, a personal finance expert.

“People are investing more and more in post office schemes in the last couple of year, as the interest rates are still a bit higher than banks. Government-guaranteed schemes make you secure and safe during the whole investment tenure,” said Nirmal Das, general secretary, WB Small Savings Agents’ Association.